Comments on: Martin Wolf Continues Attack on Fiscal Austerityhttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html
Fearless commentary on finance, economics, politics and powerTue, 31 Mar 2015 20:44:33 +0000hourly1http://wordpress.org/?v=4.1.1By: Matthttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html#comment-134300
Fri, 09 Jul 2010 10:36:12 +0000http://www.nakedcapitalism.com/?p=10776#comment-134300In regards to Hayek’s loathing of hoarding of money.
In the day, security markets meant bonds more than IPOs or secondaries? Today the biggest stock offering is from China. And rather than lend money to the economy the banks have stashed a trillion at the FRB for all of a 0.25 percent rate. I wonder what Hayek’s prescription for hoarding would be today.
]]>By: Matthttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html#comment-134272
Fri, 09 Jul 2010 07:52:09 +0000http://www.nakedcapitalism.com/?p=10776#comment-134272While sovereign debt policy is debated between the MMT, the stimulati, and the FRB/IMF clique, bubble manias do not require a sovereign, they only require leverage. Towit the FRB reports that total household debt versus wage income has gone from about 0.83 in 1981 to 1.75 in 2009.
]]>By: Viatorhttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html#comment-134079
Thu, 08 Jul 2010 13:56:42 +0000http://www.nakedcapitalism.com/?p=10776#comment-134079Not if are an American small, or even middle sized, business.
]]>By: Viatorhttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html#comment-134071
Thu, 08 Jul 2010 13:34:57 +0000http://www.nakedcapitalism.com/?p=10776#comment-134071“(European) Public policy since the 1930s rested on a broadly unquestioned ‘Keynesian’ consensus. This took for granted that economic planning, deficit financing and full employment were inherently desirable and mutually sustaining.”

from Postwar: A History of Europe Since 1945 by Tony Judt, noted liberal European historian.

And of course the parts of Europe that weren’t “on a.. unquestioned “Keynesian” consensus” were Marxist. Most of Asia – China, India, even the Tigers (the Tigers earned that sobriquet because they transitioned so successfully from a planned economy to a more capitalist economy) – have only recently begun to throw off the yoke of Socialism and Communism. Anywhere else in the world under the Soviet sphere of influence was probably Marxist or under Marxist influences including parts of Africa and South America.

One only has to have visited Washington, DC over a number of years to see the burgeoning federal Leviathan spread out across the countryside of Maryland and Virginia. The expansion of the US federal government measured in dollars, laws, regulations, employees, bureaucracies, is well documented. As is the incestuous relationship between Leviathan and big business.

So, you can see, a majority of the world has functioned under planned economics for almost a century until relatively recently. A result of that transition is that more people have removed from poverty in the last 25 years than occurred in the entire prior history of the world.

As the rest of the world moves away from planned economics we are moving towards it.

]]>By: Frank Ashehttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html#comment-134059
Thu, 08 Jul 2010 12:49:45 +0000http://www.nakedcapitalism.com/?p=10776#comment-134059For those people who think that MMT sounds a bit infantile, here’s my Kindergarten Guide to Modern Monetary Theory. Be warned, it is intentionally at a kindergarten level, like the title implies.

]]>By: S Leehttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html#comment-134043
Thu, 08 Jul 2010 11:30:09 +0000http://www.nakedcapitalism.com/?p=10776#comment-134043What you and Martin Wolf are arguing strikes me as very much one of the central points made by Richard Koo for many years, but from the opposite angle – that when the private sector starts saving (which includes repaying borrowings) and hence private sector borrowing shrinks, governments must step in as borrowers of last resort.
]]>By: michelhttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html#comment-134012
Thu, 08 Jul 2010 07:56:12 +0000http://www.nakedcapitalism.com/?p=10776#comment-134012If anyone is eating cat food in the UK, it is not because they need to. If they are doing without drugs it is not from lack of personal funds. It might happen because they do not know how to access the benefits they are entitled to. Lack of drugs might happen because of care rationing by the state monopoly care provider. But its not lack of money that will do it to you. Just think about what is provided in the UK by:

It is not being argued that all these benefits are a bad thing at all.

The disagreement is about what happens in a situation in which they exist, where there are 6 million rather well paid and pensioned and unionized state employees, when the government spends more by deficit spending in the name of stimulus. What has happened in the UK in recent years is that it does not go to the new needy class, those who have just enough private income or assets to fall outside the range of these benefits. It goes to creating more local authority non-jobs which benefit no-one. It does not go on making more drugs available. It goes on creating more ‘managers’ in the NHS, or funding artwork in hospitals, or paying the administrative class higher salaries, or funding ‘alternative’ treatments like acupuncture or homeopathy.

In the local authority it pays for jobs doing stuff like promoting diversity awareness, or going into competition with the local press by publishing free newspapers.

It matters where it goes. The problem with the solution being advocated is that 20 years experience in the UK shows that when the government spends it, over a certain level it does not go to the places it is needed. It enriches those fortunate enough to be in a public sector union who then spend their time trying to ration access to benefits.

Now obviously Yves being a sensible person would not advocate doing this as a matter of policy. But what people need to come to terms with is that this is what actually happens when you try to implement stimulus by raising government spending in an environment where we already have huge state deficit spending. This is a fundamental problem with the idea.

]]>By: Sundoghttp://www.nakedcapitalism.com/2010/07/martin-wolf-continues-attack-on-fiscal-austerity.html#comment-134006
Thu, 08 Jul 2010 07:33:47 +0000http://www.nakedcapitalism.com/?p=10776#comment-134006Historian Stephen Mihm had a short piece on Hyman Minsky published in the Boston Globe last year. (Yves has recently provided an excellent example of how one newspaper editing process worked; we can only guess at what Mimn originally intended to appear.)

The preferred mainstream tactic for pulling the economy out of a crisis was – and is – based on the Keynesian notion of “priming the pump” by sending money that will employ lots of high-skilled, unionized labor – by building a new high-speed train line, for example.

IMHO this sort of stimulus spending today results less in wage payments than in preventing firms from defaulting on loans and leasing arrangements for machines, in other words it props up the FIRE sector. I haven’t re-read them, but my impression at the time from reading Krugman’s columns and blog posts was that he pretty much tied himself up in knots in order to get to the point that he supported the 2009 stimulus package.

Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled first. The government – or what he liked to call “Big Government” – should become the “employer of last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It would be paid to workers who would supply child care, clean streets, and provide services that would give taxpayers a visible return on their dollars.

I respect Niall Fergeson and applaud him in his recent talk at the Aspen Institute for calling us to appreciate the historical moment, which I also believe is significant.

My take on the Mess at this point is that the velocity of money is what’s jamming things up, and Minsky’s bottom-up approach would be the best way to un-jam it. Combine this with a serious attack on health care costs, a carbon tax, and a VAT. Can “Minskian Bartlettism” work as a bumper sticker?

You need to get out more. Seriously. One of my friends (thank God he was well off) had parents who WERE eating pet food, they were too ashamed to tell him, he found out only via an unannounced visit. I know of people who have elderly relatives (couples) who couldn’t afford the medication both needed to live. They had to decide who was going to go without and die. A guy in his early 60s who used to support himself (he worked at a local fishmonger) is now homeless in my neighborhood. My uncle is below the poverty line, if he didn’t have medical care and access to a nursing home thanks to being a Korean War vet, he’d be dead now.

All this will get much worse if we cut Social Security and Medicare in any meaningful way soon. It does not take much to tip people who are on the edge into distress.

You act as if distress and grinding poverty among the elderly is a fantasy. You clearly lead a very privileged life.